The Office of Fair Trading’s decision to mount a formal probe into UK equity underwriting scarcely amounts as a surprise.

Each of the three main political parties told Financial News they were in favour of an investigation ahead of the election. Complaints have become rife over the scale of fees collected by the banks, plus the shrinking share of the pot given to institutions sub-underwriting rights issues.

Fuelling the outcry, Douglas Ferrans, chairman of the Investment Management Association, has picked up the baton handed to him this year by Lord Myners, former Treasury minister. He points out that 10 years ago sub-underwriters were paid 1.25% out of total rights issue fees of 2%. They are now collecting 1.75% out of 3.5%.

In a speech yesterday, he asked the famous question: “Where are the customers’ yachts?” Unlike fortunate intermediaries able to buy the best, Ferrans says none of his clients can afford to float a single boat.

It will come as no comfort to investment bankers that the man presiding over the OFT probe is Clive Maxwell, a hard-nut who worked at the Treasury during the bank bailout.

However, the OFT probe will not be a straightforward affairs. Companies only need to issue equity every now and again, and they will always want to employ the best and brightest of bankers. Chief executives are highly sensitive to the risk of ruining their career through the receipt of poor advice. The issue of price comes a poor second. At least until recently, no one ever got fired for hiring Goldman Sachs.

As regards to sub-underwriting, investors are not obliged to participate on the terms available. The fact they are willing to do so, would suggest they, like banks, see it as a low risk activity in most market conditions.

If the OFT is going to throw the book at investment bankers operating in the UK, it will need to show the way they seek to exploit human behaviour has created an inefficient market. They may care to note, that even though banks will always argue that institutions are sophisticated enough to look after themselves, emotions can often get in the way of intelligence.

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But the imposition of recommended fee scales to deal with this problem amounts to a big ask. it is more likely that banks will moderate their terms to calm things down a bit. A formal, or informal, agreement with the OFT could follow.

There are precedents. Back in 1986, the London Stock Exchange did a deal with the government which put a stop to an OFT investigation into a lucrative cartel, which led to third parties being allowed buy UK brokers. This ownership revolution became known as the Big Bang and, ironically, produced the one-stop advice to equity underwriting which has become today’s hot potato.

More recently, an OFT probe into current accounts has produced agreements on easier account switching and transparency, plus better returns for depositors.

With the OFT just starting to get stuck in, there has never been a better time for companies and investors to negotiate a better deal on fees.